Add another prominent voice in the field of economics warning of an impending recession.
“I would say it’s probably closer to a draw that the economy will go into recession by the end of the year,” Dreyfus and Mellon, chief economist and macro strategist Vince Reinhart said on Yahoo Finance Live.
Reinhart’s comments come amid multiple negative forces at play in the economy.
The consumer price index (CPI) rose 7.9% in February, marking the fastest pace of annual inflation in 40 years amid rising prices for rent, food and cars second hand. On Tuesday, the CPI could show an increase north of 8% from the March headline, as Alexandra Semenova of Yahoo Finance reports.
Meanwhile, the personal consumption expenditure (PCE) index rose 6.4% in February, following a 6.1% increase in January.
It represented the fastest rate of inflation since 1982.
Hot inflation readings in recent weeks have prompted more hawkish talk of interest rate hikes from Fed members such as Lael Brainard. This tough discussion on fighting inflation could continue this week as Brainard and other closely watched Fed members speak at various events.
With high levels of inflation and rising rates – which have pushed the 30-year mortgage to 5% – many economists are warning of an impending recession by 2023. Deutsche Bank’s Matthew Luzzetti became the first major investment economist to call a recession a week ago.
He is not alone.
“When you think of a mild recession, I think the best example is probably what happened in 2021, maybe a 2 percentage point increase in the unemployment rate, a few quarters of weak GDP growth,” Dent said. “In terms of availability, we are most concerned about the potential for 2024. We think the cumulative risk of a recession by the end of 2024 is around 35% to 40%. what we think is going to be this very aggressive response from the Fed to get inflation under control and make sure the labor market really cools,” Nomura chief U.S. economist Robert Dent said on Yahoo Finance Live. .
Dent added, “We would largely agree that the inflation situation facing the Fed is a real conundrum for them, and it will be difficult to navigate.”
For his part, Reinhart expects three 50 basis point rate hikes from the Fed soon.
Reinhart explained: “The yield curve is inverted by many measures. Oil prices are considerably higher. The Fed is tightening. We are getting closer to full employment. Trees are not growing skyward. I think if you look at the next year and a half or so, you should easily consider a recession a draw.”
Brian Sozzi is editor-in-chief and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
Follow Yahoo Finance on Twitter, Facebook, instagram, Flipboard, LinkedIn, Youtubeand reddit